Fed Survey: American Households' Economic Outlook Turns Pessimistic
The Fed's latest annual survey reveals that although 73% of American adults report their financial situation as okay or comfortable, overall views on the economy have darkened, with 42% of respondents worried about job prospects and over 90% citing inflation as the most common financial concern. The survey also found that financial well-being has significantly declined among low-income, younger, and Black groups, while energy price increases triggered by Middle East conflicts are further dragging down growth expectations.
Key Points
- A Federal Reserve survey shows that about three-quarters (73%) of American adults say they are "doing okay" or "living comfortably," but views on the economic outlook have darkened, with 42% of respondents expressing concern about finding or keeping a job.
- More than 90% of adults cite inflation as a concern, and the Fed notes in its annual survey report that price pressures remain their most widespread financial worry.
- The Fed says "58% of households reported that price changes eroded their financial situation compared with a year earlier," with 14% saying inflation made things significantly worse.
Deeper Insights
The economic outlook has dimmed since the Fed collected survey data in October. The war with Iran has intensified price pressures and prompted several institutions to downgrade growth forecasts.
"The Middle East war is expected to be a modest but significant drag on near-term growth through supply chain disruptions, higher shipping costs, and increased uncertainty in energy and trade flows," LPL Financial Chief Economist Jeffrey Roach said Monday. In a report, he noted the war could slow second-quarter economic growth by 0.2 percentage points and third-quarter growth by 0.3 percentage points.
According to a Wolters Kluwer survey, economists see a 35% probability of a recession in the next 12 months, up from 32% in February and March.
Inflation is casting a shadow over the economic outlook. Last month, a war-driven surge in energy prices pushed price increases to a three-year high, with the Consumer Price Index (CPI) climbing 3.8% year over year. Data from the U.S. Bureau of Labor Statistics released Tuesday show energy costs rose 17.9% over the past year, with gasoline prices up 28.4% and fuel oil prices up 54.3%.
Price pressures and reduced affordability have pushed consumer confidence to historic lows in recent months.
Meanwhile, data from the U.S. Census Bureau released Thursday show retail sales growth slowed to 0.5% from 1.6% the previous month, as war-driven price pressures outpaced wage gains, putting some goods out of reach for lower-income consumers. Year over year, sales rose 4.9%.
Citing the survey results, the Fed said that before the war with Iran, 8% of adults reported their household sometimes or often did not have enough food, and 16% were unable to pay all their bills in the previous month.
Although most households report stable financial conditions, the Fed says some "demographic groups—including low-income, younger, and Black adults—experienced notable declines in financial well-being between 2024 and 2025."
Additionally, layoffs increased and voluntary departures among adults decreased, "suggesting workers and job seekers face more challenges," the Fed says.
Among adults under 30, 15% were not working, with many saying they were unable to find a job.
The Fed's survey covers multiple aspects of household economic well-being, from employment and income to credit and banking.